3 Purposes Are Better Than 1

Company purposes have evolved. The usual explicit purpose of a company is to provide products and services that improve the wellbeing of stakeholders like customers or shareholders. That’s a necessary purpose, but it is no longer sufficient. To multiply the power of its purpose, a company needs to be purposeful about its intended positive impacts on the wellbeing of two critical implicit stakeholders: the environment and society-at-large. That is, “3 purposes are better than 1.”

Already, companies’ purposes typically focus on at least one of their external stakeholders. They might be investors (e.g. “Our purpose is to enrich our shareholders”), or customers (e.g. “Our mission is to improve our customers’ health and quality of life”), or even the community (e.g. “Our purpose is to enhance the wellbeing of, and create shared value for, the communities in which we operate”).

The tacit corollary to these company purposes is that company operations will not do any harm to shareholders, customers, or communities. It will not contribute directly or indirectly to systemic threats to their wellbeing. For example, we assume companies do not provide customers with better mouthwash while contributing to climate destabilization and severe weather events that might leave those same customers destitute. It’s time to check our assumptions.

This gets into the gnarly issue of a company’s accountability for its “externalities.” Until recently, businesses have been able to ignore their value chains’ external impacts on the environment and society because they have not been legally required to account for them. However, with PUMA’s publication of the first-ever Environmental Profit & Loss (EP&L) statement in 2011, and the publication by its holding company, Kering, of an EP&L for its whole group of companies for the last three years, the game has changed. It is becoming more awkward for other companies to ignore their mutual accountability for environmental and social impacts throughout their value chains.  They can’t close their eyes to what others see nor to the boomerang impacts that a damaged environment and society-at-large can have on their stakeholders and on the company itself. What’s material to its nests is material to the company.

To protect their social license to operate as good corporate citizens, companies need to consider being more explicit in their purposes about, and reporting on, how they are protecting and contributing to the overall heath and wellbeing of their usual stakeholders as well as to the health and wellbeing of society-at-large and the environment. They need a three-pronged purpose.

1. To directly contribute to the wellbeing of their usual stakeholders through their products and services.
2. To indirectly contribute to the wellbeing of their usual stakeholders by doing no harm to the environmental and social nests on which all stakeholders, and the company, depend.
3. To indirectly contribute to the wellbeing of their usual stakeholders by being restorative and collaboratively reducing the root causes of systemic environmental and social deterioration.

Click to enlarge

As shown in the adjacent figure, activating a powerful purpose is not a sacrifice for companies; doing the right things gives companies a sustainability advantage, so to speak. A three-pronged purpose is a powerful purpose. If the company is visibly fulfilling its mission to not only create benefits for the wellbeing of the company’s usual stakeholders, but also for the environment and for society-at-large, intentionally and purposefully, it will attract and retain employees and customers with similar values and be rewarded by the market.

Is it time for companies to triple the power of their purposes by making their two implicit purposes explicit?

Bob

P.S. The Sustainability Advantage Ultbook is still on track to be launched at the New Metrics conference in Boston next month. It includes an assessment of how well any planned sustainability initiative might activate the company’s purpose. I have incorporated many helpful suggestions from folks like you in the workbook’s latest draft, which I posted to my website on October 2. More comments and ideas are welcome. See the Ulbook‘s webpage for how to download the latest draft and provide feedback.

Please feel free to add your comments and questions about this blog using the “Leave a reply” comment box under the “Share this entry” social media symbols, below. For email subscribers, please click here to visit my site and provide feedback. Slides used in this blog are from my Master Slide Set, to which anyone can subscribe.